Message Received Loud & Clear

 

All the talk of the Bank of England, Mark Carney, macroeconomics, interest rates, et al over the last few weeks means little to the masses until it is delivered in a medium and message that actually matters to them.

 

Enter Santander and their 1-2-3 account.

 

The 1-2-3 account heavily marketed by Santander is a juggernaut in the bank savings world as the interest rate has been market leading for years. However, it announced this week that it is cutting the interest rate 3% to 1% on the back of the Bank of England reducing its base rate. In Olympic terms……it is Jessica Ennis-Hill going from gold to silver……still good and a commendable effort but not as good as before. 

 

The initial message to anyone with a Santander 1-2-3 account is not to switch in anger now because the 3% interest rate holds until November.

 

However, the bigger message should be one of concern for savers. With inflation rising and savings interest rates falling, there is the real prospect that the safe haven of bank based savings could actually create a loss for savers in real terms. Or to put that another way……the interest rate being lower than inflation.

 

Now imagine if interest rates turn negative and you have to pay for a bank to hold your money for you whilst inflation keeps rising……it’s a car crash waiting to happen. (see my previous blog 'Bank of Mattress'

 

 

All in all, savers earning less interest can only have a detrimental impact on consumer confidence (and in turn the economy).

 

Not good.